Political Entrepreneurs

The Economic Engine of Political Change

November 2012

Today’s Washington Post highlights the latest twist in the debate over the so-called “fiscal cliff” and how the U.S. government should find new ideas as it tries to balance its budget. The “new” idea: eliminate or substantially modify the mortgage interest deduction. Both Democrats and Republicans have made statements in support, albeit with few specifics. Why is this news? The 1986 tax reform, which substantially removed all kinds of deductions, left mortgage interest untouched. The special interests…Read more»

Wayne and I are speaking on a panel discussion at Western Carolina University today. We have a political scientist and a political theorist as respondents. We’re greatly looking forward to this and want to thank Steve Miller for setting it all up. Here’s a flyer for the panel. Later today we’ll post a summary of the discussion. Click to enlarge.

We’re happy to have blogger extraordinaire, Lynne Kiesling at KnowledgeProblem, recommend both Madmen and PoliticalEntrepreneurs.com. Lynne writes: Ed Lopez and Wayne Leighton have a brand-new book out, Madmen, Intellectuals, and Academic Scribblers , and this blog is a companion to that work… Both the book and the blog look like a worthwhile read, and have moved to the top of my list. Visit Lynne’s blog , which she co-writes with Michael Giberson, and which I read regularly!

In the book, we tackle the big question whether crisis is necesary or sufficient for significant reform. Many people seem to think so, including Milton Friedman and Chicago’s Mayor Rahm Emanuel. As we write in chapter 1, political entrepreneurs can often be seen attempting to building the perception of a crisis: If you listen to politicians and pundits enough, crises both real and imagined will become exceedingly common. That’s because madmen in authority are expected…Read more»

Still two weeks remain before the winner of the Heisman Memorial Trophy is announced (explained below). Each year, about 900 members of the media and former Heisman winners cast ballots for their top three picks. Awarded since 1935 to the best player in college football, the Heisman traditionally has gone to upperclassmen, usually running backs or quarterbacks. Only three sophomores have ever won, the first in 2007. And no freshman has ever won, with just…Read more»

The first lesson in economics — incentives matter! — applies well beyond citizens in their role as taxpayers, employees, business owners, and the like. And one of the key lessons of public choice economics — a lesson that Ed and I discuss in detail in our book — is that incentives matter in politics, too. Politicians do not leave their self-interest at the door when they step into the legislature. This seemingly obvious point is…Read more»

A recent article in the New York Times had one of what will surely be many stories on how investors and business owners everywhere are responding to potential changes in the tax laws. Money quote: Kristina Collins, a chiropractor in McLean, Va, said she and her husband planned to closely monitor the business income from their joint practice to avoid crossing the income threshold for higher taxes outlined by President Obama on earnings above $200,000…Read more»

Why write a book about political change? How do we go from ideas about politics to a change in political or social outcomes? When does political change happen? These are just a few of the big questions that Ed and I address in Madmen, Intellectuals, and Academic Scribblers. Recently, I sat down with the irreplaceable Luis Figueroa of Universidad Francisco Marroquín to talk about the book. Click the image to watch the interview. Or click here for the interview…Read more»

Wayne and I talked about it a few times before deciding to name this site Political Entrepreneurs. We considered going with something catchy like Madmen in Authority, but we feared that would draw more focus to policymakers than we intend to. Ultimately we went with Political Entrepreneurs because it puts attention on the driving force of political change in our framework, namely the political entrepreneur. This of course raises the question: what do we mean…Read more»

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.189, ch.7)

The most successful entrepreneurs know what they do well, they know the market and the opportunities within it, and they choose those activities that create the most value. This is true in economic as well as political markets.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.178, ch.7)

[W]hen the right elements come together at the right time and place and overwhelm the status quo, it is because special people make it happen. We call them political entrepreneurs.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.176. ch.7)

While we started this book with Danny Biasone saving basketball, we end it with Norman Borlaug saving a billion lives. These stories are not that different. Both faced vested interests, which were reinforced by popular beliefs that things should be a certain way—that is, until a better idea came along.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.174, ch.6)

Because there was a general belief that homeownership was a good thing, politicians found the public with open arms.... Everybody was winning—except Alfred Marshall, whose supply and demand curves were difficult to see through the haze of excitement at the time, and except Friedrich Hayek, whose competition as a discovery procedure was befuddled... In short, once politicians started getting credit for homeownership rates, the housing market was doomed.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.166, ch.6)

Everyone responded rationally to the incentives before them. In short, the rules that guided homeownership changed over time, which in turn changed the incentives of these actors. And bad things happened.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.153, ch.6)

They understood the economics. The ideas had already won in ... the regulatory agency itself. All that remained to be overcome were some vested interests and a handful of madmen in authority.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.146, ch.6)

If the idea for auctions of spectrum use rights had been part of the public debate since at least 1959, why didn’t the relevant institutions change sooner? What interests stood in the way?

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.121, ch.5)

When an academic scribbler comes up with a new idea, it has to resonate well with widely shared beliefs, which in turn must overcome the vested interests at the table. Many forces come together to explain political change, even though it may seem like coincidence of time and place.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.120, ch.5)

It’s the rules of the political game that deserve our focus, not politicians’ personalities or party affiliations.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.119, ch.5)

In short, ideas are a type of higher-order capital in society. Like a society that is poor in capital and therefore produces little consumer value, a society that is poor in ideas and institutions will have bad incentives and therefore few of the desirable outcomes that people want.